Houston Estate Planning and Probate Blog

Friday, December 10, 2010

Adult Children and Elderly Parents: Caring for Each Other

The idea of adult children caring for aging parents or grandparents is not a new one. In fact, with the aging Baby-Boomer population, adult children giving up free time or extra hours at work to care for relatives is a growing trend. But recently families have begun creating “caregiver compensation agreements,” something which can end up benefiting both parties in a number of ways.

According to a recent article in the Wall Street Journal, “the high unemployment rate, the rising cost of nursing-home care, an aging population, and a 2006 change in Medicaid law that makes it harder for people who wish to qualify to give away assets” are all contributing factors to the growing trend of these compensation agreements among family members.

How can it help you?

If you’re a caregiver the benefits of a caregiver compensation agreement are fairly self explanatory. “Some 37% of caregivers surveyed by the NAC in 2007 said they had quit a job or reduced their hours to accommodate their responsibilities,” some kind of compensation seems only fair.  And if you feel uncomfortable taking “wages” from your parents, there are other ways to arrange for compensation. “Attorneys say many families pay an hourly wage. As an estate-planning tactic, others opt for annual gifts or a lump-sum payment designed to cover services over an extended period. Some arrange for the caregiver to receive a larger inheritance.” It will all depend on what works best for your family.

If you’re the one receiving the care, compensation agreements can benefit you as well. Paying a family caregiver can help you deplete your savings and qualify for Medicaid, it can also help you reduce your taxable estate, as well as give a gift of sorts to younger family members who may be in need. Remember that Medicaid rules vary from state to state, so enlist the help of your attorney before signing any contracts.

However you may decide to structure your compensation agreement, disclosure can be of the utmost importance. Make other family members aware of the agreement up front to avoid suspicion or hurt feelings later on.

Wednesday, December 8, 2010

Talking to Siblings About Caring for Mom and Dad

Many modern families have members living all over the country—and all over the world.  Which means that the holiday season provides one of the only times to all get together in person, celebrate, catch up... and talk about caregiving strategies for aging parents. Unfortunately, this kind of conversation can be a difficult one, especially if not all siblings agree about mom or dad’s needs, or if one sibling feels that he or she shoulders an unfair amount of responsibility. In spite of the difficulty, having the conversation can be of the utmost importance.

In this article in Time Magazine author Francine Russo describes the consequences that can follow when lines of communication break down. “It wasn't until my mom's funeral, watching my dad and sister cling to each other and weep, that I got a hint of their long ordeal — and how badly I'd screwed up.”

Russo makes the point in her article that much of the tension and disagreement among siblings can come from inaccurate or conflicting information. “Friction often stems from parents giving their children different information about how they're doing. Mom may put on a good show for the out-of-towner, who then discounts what the local sibling says.” This is all the more reason for siblings to communicate with each other, not just through mom or dad.

If you aren’t sure how to get the conversation started, Paula Spencer, senior editor for wrote this article for Third Age which gives some helpful strategies on how to ease into the difficult topic of caring for aging parents this holiday season.

Monday, December 6, 2010

Make This Year Memorable: A 2010 Gift-Giving Guide

Fruit baskets, kitchen gadgets, and Kindles aren’t the only gifts you can give loved ones this year (although you’ll see below that video game systems still make the cut.)  Instead, why not give something unique that will leave a lasting impression and help protect your loved one?  Here are a few non-traditional ideas for friends and family of every age.

Young Adults: What do you get the kid who already has all the video games he could want?  How about a meeting with a financial planner?  It may not sound exciting, but young adults are leaving home with less financial experience than ever, making it difficult for them to know how to budget for their own household, plan to eventually buy a house, or even stick to a strategy to pay of credit debt or student loans. 

Parents of Young Children:A nomination of guardians drafted by a qualified estate planning attorney is an excellent gift for young parents. So also are advanced healthcare directives and a last will and testament.  All of these will help protect the young family as well as provide peace of mind.

Baby-Boomer Friends and Family:The big concern among Baby-Boomers right now is long-term care.  After paying for their elderly parents to grow old Boomers are now turning a concerned eye to their own futures. 

Elderly Parents and Grandparents:Forget your teenage nephew; your elderly grandparent is the person who could benefit from having a video game. According to this story in the New York Times game systems such as the Xbox Kinect and Nintendo Wii Fit help get the elderly up and moving and can significantly improve their balance.

This year, forget about the impersonal gift cards or scented candles; instead give a gift that will leave a legacy.

Friday, December 3, 2010

Are Misconceptions Keeping You From Planning for Retirement?

Planning for retirement can be tricky business.  When we discuss our clients’ estate plans and assets with them we can’t help touching on retirement plans, so we hear a lot about the worries that go along with preparing for an uncertain future.  There are many variables and unknowns that can crop up between starting out in your 20s or 30s and your eventual retirement at 60 or 70; and there are a lot of myths about retirement which are daunting, discouraging, or just plain misleading.

U.S. News and World Report recently published an article which attempts to address some of these myths and set readers back on the right track to retirement.  We hope that all of our readers are already saving for retirement, but because we know just how important it is to save early and save often we’d like to list some of the myths here for our readers:

#1 You don’t make enough money to save for retirement.

#6 You need to be debt free before you can invest for retirement.

#8 Social Security benefits will be enough to retire on.

#9 You have to retire at age ___.

These are only 4 of the 10 myths covered in the article.  Click on the link above for a full list of commonly-held assumptions about retirement that may be preventing you from making the most of your retirement savings.

At our office we help our clients protect and plan for the future, retirement is often a part of that future.  If you have any questions about how to protect your retirement investments, or how to ensure that they transfer properly to your heirs if anything should happen to you, please call our office.

Wednesday, December 1, 2010

A Good Year for Giving

The season of giving is upon us... and thanks to 2010’s unusual tax laws we may see some very large gifts before the year is out! If you are considering being particularly generous this year, this article from Reuters explains why the federal government is making 2010 an exceptionally good year for giving.

Most people know that for this year only there is no estate tax.  But the year is almost over, and next year the estate tax is slated to go up to an astounding 55%.  The more you can afford to give away now, the less that will eventually be subject to the estate tax.  However, “the incentive to give stems not just from a looming increase in the estate tax, but also from the lowest tax rate on gifts in a generation -- a maximum of 35 percent. That top rate was 45 percent in 2009 and jumps to 55 percent next year unless Congress acts.”

Those last three words, “unless Congress acts,” carry a lot of weight.  Congress could choose instate lower and more reasonable tax rates in 2011; but right now we just don’t know, and the clock is ticking to the end of this “golden year.” There is nothing wrong with waiting to see what happens, but you may want to at least have the conversation with your estate or financial planner, so you know your options and can act swiftly when the time comes.

Very few people really want to give away their hard-earned money; but as the saying goes, you can’t take it with you, and most people would rather leave their legacy to their family rather than the government.

Monday, November 29, 2010

Estate Planning Through the Ages

Can you remember what you were doing in your early 20s?  Can you imagine what kind of life you’ll be living in your 70s or 80s?  We experience incredible changes as the decades roll by—not just to ourselves, but in the world at large. With our lives changing so much, our estate planning documents and strategies should hardly remain static. Here is a guide to how your estate plan may or may not evolve through the decades.

In Your 20s:You’re young, just finishing school and starting in your career, unlikely to be married yet... the last thing you’re thinking about is estate planning! At this time of life, who gets your “stuff” may not be as important as who will make your decisions. Choosing your financial and healthcare agents and creating your power of attorney and healthcare directive are the important things to do at this time.

In Your 30s:Marriage, children, home ownership—most of these things happen in your 30s, and your estate plan should reflect that. Now is the time to choose guardians for your young children, decide with your spouse how your joint property will be distributed, and get serious about life insurance.

In Your 40s:This is when your strategy may switch from simple direction of inheritance to more serious asset protection. You’ve worked hard and saved, and you’ll want to think about the best way to maximize your assets with trusts and tax planning.

In Your 50s:As your children start to become independent you may have more freedom with your income.  Some people choose to create charitable trusts, some prefer to invest for retirement, and still others decide it’s time to take a risk and start over with a second career.  Your estate planner can advise and help with all of these.

In Your 60s:Ah retirement! Making the big change from work to retirement means making changes to your estate plan as well. If you’ve been keeping up with your planning through the decades all that is required now will be some basic maintenance; changes to account for marriages of your children, the birth of grandchildren, and your own relocation to someplace warm and sunny.  But beyond the basic maintenance, you may want to start doing some simple Medicaid and long-term care planning—just in case.

In your 70s and Beyond: Health is the key word now.  Our life-spans are getting longer, but so are our illnesses, you need to be ready.  Tighten up your estate plan, invest in long-term care insurance, and although it may sound morbid, talk to your doctors and family about your end-of-life decisions.

The life alterations that come over a span of decades are difficult enough; you don’t want to have to find a new lawyer every time your circumstances change.  Our firm makes it our business to keep up with you at every stage.

Monday, November 22, 2010

How to Avoid Being “Strangers Rather Than Spouses”

Over the past few years certain states have taken steps to legalize same-sex unions, with many same-sex couples joyously taking advantage of the new laws... but in spite of state approval, these newly married couples do not have the same rights as traditional married couples under federal law.  This recent article from Elder Law Answers describes how one gay widow is suing the federal government for reimbursement of the estate tax bill she paid after her wife’s death.

“Edith Windsor and Thea Spyer became engaged in 1967 and were married in Canada in 2007, although they lived in New York City. Ordinarily, spouses can leave any amount of property to their spouses free of federal estate tax. But when Ms. Spyer died in 2009, Ms. Windsor, 81, had to pay Ms Spyer's estate tax bill because of the The Federal Defense of Marriage Act of 1996, which denies federal recognition of gay marriages. ‘While New York State considered us married, the federal government did not, so the government taxed Thea's estate as though we were strangers rather than spouses.’"

This story illustrates again how important it is for any non-traditionally married couple to take their estate planning seriously.  A properly drafted will, trust, power of attorney and health care directive can help ensure that you and your partner are treated as spouses rather than strangers. 

Contact an attorney in your state to find out how estate planning documents can help you achieve your goals.

Friday, November 19, 2010

Estate Planning for Adoptive Families

We’ve mentioned in previous posts how important it is to update your estate plan when you experience big life changes; this includes moving, getting married, having a child... and it especially includes adopting a child.

A recent article in Forbes reminds us that “An adopted child only has rights to your estate once the adoption has been finalized. The length of time it takes to finalize an adoption depends on where the adoption was initiated as well as a host of other factors. This process can take anywhere from six months to several years to complete. In the event that you pass away before this process is complete, it is likely the child would not be entitled to any of your assets.”

Creating or updating an estate plan is one way to ensure that the child of an adoption-in-progress receives the rights and benefits he or she needs. An estate plan can not only provide financially for your adopted child through your will or trust, but can also nominate guardians for the child, make provisions for the child’s medical treatment (if necessary), and specify your wishes for the child’s future education or living arrangements.

The article above points out that “Particularly in the case of an open adoption, it is important to establish a good relationship with the individuals outside your immediate family, such as the child’s birth parents, who will have a direct interest in your child’s life.” Making provisions in your estate plan for birth parents or grandparents can smooth the way for your child and for the guardians you’ve chosen if anything should happen to you.

Anyonewith children should have detailed and updated estate plan; but for families with adopted children having a plan in place is of the utmost importance.

Wednesday, November 17, 2010

Make It Easy for Your Heirs to Say “No”

People have been known to do crazy things when taxes are as unpredictable as they are currently.  No, we don’t mean “offing” their relatives (although there have been plenty of those kinds of jokes going around this year), we’re talking about saying “No thanks” to an inheritance (also called disclaiming.)  This article in explains that “By disclaiming, one heir can abstain from taking an inheritance, leaving the assets for other beneficiaries. Planning in advance for such a move can save huge amounts of estate tax. That means more money for heirs.”

We realize that with no estate tax in 2010, disclaiming an inheritance is not a likely scenario this year; but next year the tax is expected to come back, although at what rate or with what exemption is still anybody’s guess. That means there are plenty of reasons why someone might want to pass on a large inheritance, including:

  • To pass the benefit of the inheritance on to another family member (generally a younger family member who could use the money for college, a first house, etc.)
  • To avoid passing the inheritance directly on to creditors if the initial beneficiary is in debt or involved in a lawsuit.
  • To avoid being bumped into a higher tax bracket.

The best reason to account for the possibility of disclaiming in your will or estate plan is that it provides your heirs with flexibility. “Even if a new estate tax law is passed, uncertainties will remain. You don't know when you'll die. You can't know for sure how much you'll be worth. Congress may create new exemptions, tax levels and other rules.”

You never know what the future may hold—for you or your heirs. When in doubt, it pays to make provisions for any eventuality.

Monday, November 15, 2010

Family and Future: The Keys to Top Notch Estate Planning

We write a lot on this blog about what estate planning is truly about: it’s about laws, taxes, assets, and documents of course; but deep down, estate planning is about relationships.

As estate planners and advisors, an important part of what we do is creating the best estate planning or asset protection vehicle we can for our clients; but achieving this goal involves far more than simply writing a document—it also involves listening to our clients, reading between the lines of sensitive family interactions, and it often involves looking into the future to catch potential problems before they happen. 

A recent article in the Wall Street Journal describes the unorthodox lengths to which advisors will go to help clients achieve their goals.  “For the family with the gridlocked siblings, [their financial advisor] arranged a session of personality-type charting with an outside expert. The tests showed one of the brothers-in-conflict to be a hard-driver who loved to make decisions on the fly. His brother was more analytical, and needed time to reach conclusions... Establishing that these conflicting traits are permanent characteristics has helped the brothers understand each other’s work habits and function better as a team. “

Our firm may not yet have had to arrange personality-type charting sessions, but this “running interference” or acting as a mediator and guide is exactly what we do. Evaluating goals, assessing relationships, identifying priorities and facilitating productive discussions is part and parcel of being a good estate planner and a great family attorney and advisor.

Estate planning and asset protection may sound like it’s about things and wealth, but a good advisor knows that it is always about family and relationships.  Consider this when you’re looking for an estate planner: Do you want an advisor who is simply protecting your wealth, or do you want an advisor who is looking out for your future and your family?

Friday, November 12, 2010

The Ins and Outs of Incapacity

Most people think that having a trust is about controlling (to an extent) what happens to your assets after you die.  This is true, but a trust actually has a much broader scope: a trust can also protect and provide for your loved ones—and more importantly, it can protect and provide for you—if you should ever become incapacitated.

In basic terms, incapacity means that you are no longer able to make decisions for yourself. Sometimes it is easy to determine incapacity: the person is in a coma or unconscious and obviously unable to make decisions.  But sometimes it’s more difficult.  What about whether or not a person is able to make rational decisions?  What if someone is suffering from Alzheimer’s, Dementia, or even a severe mental illness... should that person be making important financial decisions?

It is important to include a discussion of incapacity in your trust, because this one word carries a lot of weight.  It is when you are incapacitated that your successor trustee will take over, when the agent nominated in your Healthcare Directive will get the authority to make health care decisions for you, and when your financial Power of Attorney will go into effect.  With so much hanging on a single word, it’s important to know exactly what that word means.

Every standard trust should have a definition of incapacity as determined by a court of law.  This means that you are deemed incapacitated when a court of competent jurisdiction determines that you are unable to legally handle your own affairs.  A really good trust will also include a definition of incapacity as determined by two physicians; which means that two independent, licensed physicians have examined you and have determined that in their opinion you are unable to effectively manage your property or financial affairs.

There are many reasons why you want to have more than just the standard definition of incapacity, the primary reason being that court proceedings can be lengthy and filled with red tape.  While your agent is spending days or weeks going through the legal process, your estate is languishing and your financial agent is powerless to take action on your behalf.  Giving two physicians the power to determine your incapacity will circumvent the red tape and prevent lengthy delays.

Call or come into our office for more information about incapacity and what it means in your trust or Healthcare Directive. 

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